Custom Truck One Source(CTOS) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2022 was $362 million, down approximately 3% compared to Q2 2021, primarily due to a decrease in new equipment sales [27] - Adjusted EBITDA improved by 9% to $85 million compared to Q2 2021 pro forma [28] - Net income for the quarter was $13.6 million, marking the first positive net income since the merger [28] - Gross profit margin increased to 34.8%, up from 28.7% in Q2 2021 [29] Business Line Data and Key Metrics Changes - ERS segment rental revenue was $108 million, a 2.4% increase versus Q1 [32] - TES revenues were $181 million, up 8% sequentially from Q1 [33] - APS segment revenue increased by 5% to $35 million compared to Q1 [35] - ERS utilization was 83%, up from 81% in Q2 2021 [30] Market Data and Key Metrics Changes - TES backlog grew to a record $664 million, almost three times what it was at the end of Q2 2021 [11] - Inventory increased by $72 million compared to Q1, indicating a positive trend for the second half of the year [20] - Production in Q2 was the highest quarterly production in the company's history [20] Company Strategy and Development Direction - The company is focused on optimizing production and service delivery to achieve strong revenue and margin growth [24] - A stock repurchase program of up to $30 million was approved to manage market volatility and enhance shareholder value [14] - The company aims to maintain a strong liquidity position while pursuing selective strategic growth through M&A [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating supply chain challenges and expects continued strong revenues and margin growth in the second half of the year [13] - The company anticipates that supply chain improvements will enhance production capabilities in Q3 and Q4 [22] - Inflationary pressures are being managed through price increases and production efficiency initiatives [34] Other Important Information - The company appointed Chris Eperjesy as the new CFO effective August 15 [26] - The company increased borrowings under its ABL by $25 million, ending with an outstanding balance of $435 million [37] Q&A Session Summary Question: Overview heading into the back half of the year - Management is confident that they will not lose business despite supply chain constraints, with a growing backlog [44] Question: Cadence of demand and fulfillment in the back half - Management expects demand to build into Q3 and Q4, with inventory and production levels supporting this outlook [45] Question: Strategic approach to feeding ERS versus TES - The company is committed to growing the rental fleet while balancing demand across both segments [52] Question: Managing wage inflation and rate increases - Management is having fair and reasonable conversations with customers regarding price increases due to inflation [55] Question: Confidence in sequential improvements in adjusted EBITDA - Management is confident in the back half of the year due to improved visibility in the supply chain and inventory growth [57] Question: Rental utilization expectations - Management expects rental utilization to remain in the low 80s, with potential for slight increases [61] Question: Infrastructure dollars flow - Management believes infrastructure spending will contribute to growth, but it has not yet significantly impacted current operations [62] Question: APS segment performance and integration - The APS segment is performing well, with good growth and integration with ERS [71]